No it’s vastly different - give it a try first . Reverse debugging with full dataflow is magical. Interestingly enough, it takes a while to get to used to it since you tend to do things the old way, when the Pernosco, science fiction way is much better and actually works
Im reasonably familiar with the exotics quant space.
It’s essentially IT/data work - the days of sophisticated maths are mostly gone. There always was a lot of code, but these days for most people there’s little to no new maths.
From what I’ve seen, post-2008 the job changed significantly, with more IT, less maths, more standardization - basically the job moved from bespoke everything to super industrialized. You’ll be able to have your model work for one underlying and one product, but what’s really useful is for lots of underlyings and many products - and that’s very hard.
That being said, and that’s important, you must understand the maths behind, otherwise you won’t be able to do anything useful.
I started my career in derivatives. Mostly vanilla, but I did have a look in the exotics.
Intellectually, it's interesting when you start. There's all these weird payoffs that you are introduced to, and it feels like a game.
The thing is, there's a limit to how exotic things can get. People have already figured out how to price most of the things you can imagine, including all the things that customers normally ask for. Most of the day goes on looking after your hedges, basically implementing the model.
It's like a zoo. When you arrive there's a bunch of different, interesting animals. After a while, you've met them all. There's no new animals, just variations of existing ones.
However the thing that is really an issue is how the business works. Over time I came to the conclusion that the quants in the derivs space are really secondary to the salespeople. How important is the quant who can get the price right to within 1%, when the sales guy can talk the customer into overpaying by 5%? Sometimes it feels like the customer is not even shopping the structure around at all, he just feels comfortable with his sales guy and is willing to hand over a few million bucks of customer money with barely any thought.
This matches my experiences as a non-quant, but havin done support work for quite a few of them. You can feel the novelty slough off of them as they get burned down into realizing they're just fitting curves.
Spotting fish who you can overcharge is not really a sustainable business model. You can do it once but your colleagues will find out, move to a competitor, and next time they'll rip them off a bit less than you did and you'll have to rip them off less than that.
There is, eventually, a shortage of dumb money. The sustainable way of making money involves competition, and this involves knowing the "right" price within a tight tolerance.
No, the feedback loop isn't closed. The fish customer just keeps handing his spread to his favourite sales guy.
I've witnesses this several times, some trader always uses the same relationship, irrespective of cost. I've seen this both in terms of friends from a long time ago helping each other, family, or backhanders.
And so the real winner is that sales guy. I've known people climb to the very top of well known institutions on the back of relationships with just one hedge fund.
What you're describing is a sort of ideal market from an economics textbook.
The situation you are describing definitely happens, people have their mates they like working with and a single relationship can make a whole career.
Normally though, such relationships do not involve the sales person charging significantly above market rates. The client usually has very strong incentives to reduce costs. While a single salesperson might build a career on a chummy relationship this isn't a sustainable approach for an entire firm to take because it is too unusual. The majority of the revenue is coming from client/sales relationships where the client is at least somewhat price sensitive and sufficiently savvy to get more than one quote.
> but these days for most people there’s little to no new maths.
You are right. For most people there's little to no new maths.
But not for all. There's still plenty of good quality math to be done in the exotics space. However, there's a bit of Catch 22 that prevents people from doing new math: all the big shops have had exotics libraries since before 2008, and because of the exotics hiatus between about 2008 and maybe 2013, the research momentum was lost. After that, most quants in the space were happy to find ways to use the old stuff, and apply small tweaks at the margins. Most small shops use vendor models (Numerix, Murex) or open source (QuantLib), and people who use vendor solutions or open source are not looking for cutting edge stuff.
I assume exotic derivatives (binary, asian, barrier options...) and structured notes that predominantly use above said derivatives (autocallables, barrier reverse convertibles, accumulators etc.)
For a structured products introduction you may take a look at this one: https://sspa.ch/en/book/
It's a very simple book, very high level, but explains the most popular structured products in a very simple manner. If you can read a payoff diagram, then this is the simplest intro.
Looking at their website though, they seem to have some nice online material there also. For example this explains the 5 most popular products, and perhaps that's good enough for an introduction (really these 5 products cover 90% of the market anyway, though there's no limit to how exotic some bespoke structures can get): https://sspa.ch/en/lab/?underlying=CH0012221716&final_fixing...
In case you're interested in getting to get to learn about them on a deeper level I would recommend https://www.amazon.com/Exotic-Options-Hybrids-Structuring-Pr.... This book explains not only the products, but also the pricing dynamics and hedging too.
Despite its appalling Amazon reviews I consider this book to be a real gem when it comes to the introduction to vol trading (basically dynamic hedging of equity derivatives)
Patrick Boyle, early in his YouTube career, made some videos on exotic options. This is a lot more engaging and possibly more informative than reading Hull.
There's definitely room for new math but , at least for banks, the process of getting your fancy model validated by internal model validation teams and regulators is so time and energy consuming that most people don't want to bother with using all the fancy math they could use and instead rely on simplifications and simple extensions.
What happened? Is this a case of the actual job changing, or just title inflation? I’d expect the quants to be the ones doing the math and implementing the kernels…
Several things : immediately after 2008 less demand for exotics because clients were afraid of them, cutting costs rather than increasing revenue ( that’s industrialization with IT and standardization ) and more importantly, industry reaching some kind of maturity, with large quant libraries which are pretty stable these days.
These days a single machine with lots of ram and cores will handle almost everything you throw at it, barring specific compute intensive / memory bound scenarios ( current AI, gaming etc ).
Is the same mechanism at play with football ? Say Real Madrid gets so much money from champions league that they can buy all the best players and then keep winning ? And then only a small clique of elite clubs end up winning all the time?
It depends what you mean by "best players". Real Madrid have twice tried to just buy "Galacticos" - the generally-recognised superstar players - and cram them all into the same team, regardless of what position they were suited for. It didn't really work out like they hoped but it did get them a lot of attention.
They found more success when they bought the best team i.e. the best players in each position. Winning in football is difficult enough that you still need great tactics, management, experience, and luck to have actual sustained success. Money helps buy a lot of that, though.
But beyond Real Madrid your point is correct. More and more money is aggregating at the top, especially the English Premier League, and others are getting left behind.
Its interesting - the salary cap comes into play as well - but this article (and the parent article which is a bit more detailed into the tennis aspect itself) basically summarizes to 'top tennis players can use outsized prize winnings to hire top staff to extend their dominance'.
At the root - surely the same is true - top paid footballers likely pay (themselves or through the team) for top staff (physio, coaches, trainers) except substituting the resulting extension of dominance for whatever happens in that particular sport; whether growing older is more or less of a cost than in tennis.
What is interesting is that in a team sport, the money that Real Madrid makes is probably enough to hire top staff, which then applies to the whole team. (Players themselves may go above and beyond that.)
In tennis (simplifying) - there is no team, Federer gets all the money, Federer reinvests what he deems necessary into his own continued performance, expecting outsized benefits.
Now if the only benefit gained from being at the top is money, all that is necessary is outside funding of some sort to help punch your way into, and to extend your stay in the top 100. Would be curious if the two under 25s now dominating the scene are doing so on physicality, money, or more likely a blend of the two.
Essentially the article sort of describes the precarious-ness of being a top ~1000 player, having a very narrow period of time before finances fun out, or you age out (without the proper support structure, ex. get injured), before you start making the money necessary to fund staying in the sport at a high level. And I guess the argument is the sport would be more fair and balanced if ex. everyone who entered the top 1000 were able to get access to the support that the top 100 (or 10 as mentioned) have.
Rosters have some restrictions in terms of size, in terms of home grown talent, talent from outside Europe, etc. There are also a ton of great football players out there. One team can't buy up all the talent, but a clique of elite teams can.
There is some concept of financial fair play too, but that still rewards bigger teams who are already rich.
There are probably studies written on this topic...
That’s what struck me immediately - these are all typical tricks from the 90s. I remember demos ( I think complex/dope in 95) where the awesome ‘real time reflections’ where actually an animated texture. I was quite impressed when someone explained the trick.
